"HD Hyundai Heavy Industries Seen Posting Medium- to Long-Term Growth; Business Diversification Expected"

[Financial News] LS Securities forecast that HD Hyundai Heavy Industries would sustain its medium- to long-term growth through expanded engine production facilities and business diversification. However, it lowered the multiple used in its valuation while maintaining its Buy rating, and cut its target price to 600,000 won from 800,000 won.
Lee Jae-hyeok, an analyst at LS Securities, said on the 14th, "HD Hyundai Heavy Industries is expected to post revenue of 6.2674 trillion won and operating profit of 972.2 billion won in the third quarter, up 41.9% and 74.5%, respectively, from a year earlier, in line with market consensus."
In the third quarter, fewer operating days during the off-season and a sharp drop in the won-dollar exchange rate weighed on results. However, the continued recognition of revenue led by gas carriers is seen as having improved profitability as the share of high-value-added vessels increased. The analyst also forecast that the engine and machinery division would continue to deliver stable profit growth, supported by its order backlog for marine dual-fuel (DF) engines, although results related to AI data centers had yet to be fully reflected.
Expansion of engine production capacity is cited as a key medium- to long-term growth driver. On the 10th of last month, HD Hyundai Heavy Industries disclosed a facility investment plan totaling 1.0722 trillion won. Of that amount, 833.6 billion won will go toward expanding HiMSEN engine production capacity, and 238.6 billion won toward building production facilities for key small modular reactor (SMR) components.
The analyst forecast that HiMSEN engine production capacity, which stood at 3.0 gigawatts (GW) last year, would expand to 7.2 GW by 2030, and that the engine business portfolio, until now centered on marine applications, would also diversify in earnest into power generation.
The analyst added that the company had strong growth potential based on its comprehensive and diversified business portfolio, and maintained it as the sector's top pick. He also said it stood out as relatively attractive from a valuation perspective, with a 12-month forward price-to-earnings ratio (PER) of around 11 times.

[email protected] Im Sang-hyeok Reporter